All Forum Posts by: Amy Hu

Hi Amy, 

Are these all your personal rentals? Please send me more information on these I am very interested. 

My email is [email protected]

Best, 

Junior 

Wholesalers, I am looking for 3 bed single level home in Beachwood or surrounding areas for an older couple that is looking to downsize. I would love to do a rehab for them. Let me know if you have anything that meets these requirements.

@Amy Hu another way to look at this is that 750 hours is basically like having a Monday - Friday job for three hours a day, 52 weeks a year. The biggest time consumer would be your apartment building, but that is being managed by a PM. I understand you need to manage the PM and rehab, but it is really a stretch to believe you are spending 3 hours every day on this. If you are spending that much time on the activities you describe, then you are not very efficient. 

I am just trying to be realistic, keeping in mind you may need to defend your claims, you want it to be substantiated easily. 

I know some accountants will encourage you to stretch the truth around your true activities, but when it comes to the IRS, I would not play games like this. Saving a few bucks isn't worth the risk.

My best advice is start tracking your time every single day. Log every activity to the exact minute for the next two weeks. At the end of two weeks, evaluate where you are at and see if you really are doing 3 hours each day. Becoming a part time agent will easily push you over 3 hours a day, so that seems like the best plan.

I am no way an expert but it does seem to me an easy way to do this is to get a RE license hang it with a broker and when you do your tax return they ask for occupation and you say real estate .  then you can represent your self in your transactions and then add up all these other activities.

FYI, changing from passive to active actviity, you won't be able to take those passive carryforward losses, until you go back to passive or sell all activities related to the losses.

True, they have very high taxes. My strategy for this is to buy REALLY run down or damaged properties in order to get the purchase price as low as possible. I've been able to pick up a property in Shaker for $27k which will cut $9k annual tax bill down to way less than half of that. Plus, since these properties need so much work, i'm able to get my all in cost at about 65% - 70% of ARV which is perfect for the BRRRR strategy. The only problem is, this isn't a very stable business model (not enough properties will sell in this price range). It's great for the one-off deal for the year, but certainly not something you can go from 0 to 100 units in a couple years doing.

PM me for the agent info, I would rather not blast her info and have the noobs that have no ability to buy properties take up her time.  Not trying to sound rude or harsh btw!  I'm just very protective of the professionals I use as I would expect the same level of respect from them as well.

i checked out brandon hall's blog linked by @James Masotti and was disappointed to read that research on properties was not considered material participation.  @Jim Kennedy, are you willing to elaborate on the "64 things" you referred to in your earlier post?

@Amy Hu

There's no clear-cut answer to what does and does not count towards 750 hours. The 3 activities that you listed might all count, depending on the circumstances, but none is automatic, with selling the property being the safest of the 3. Courts have ruled inconsistently on these issues. 

You'd want to be safe and have 750 hrs of solid hours, such as negotiating, closings, rehab management, dealing with tenants etc. Think this way: the kinds of work for which you would have paid other people. Then those activities you listed become the safety buffer that you can lose in an argument with the IRS and still have 750 hrs.

Also, there's a controversial issue about an election to aggregate. Do NOT do it without talking to a couple of experts. It's not a no-brainer. There are both pros and cons.

Do NOT try to read Section 469 of the IRS code, unless you have tax/legal background. It cannot be successfully read by non-professionals. Even CPAs and lawyers struggle to interpret it. The IRS audit techniques guide is an easier and more practical reading, however still pretty technical and heavy.

Finally, one important point that you may not realize: even if you do qualify as a REPro for 2018, only 2018 expenses will be unrestricted. Old passive losses remain suspended until you sell the property.